Softbank rules Net trade in Japan
By Yuri Kageyama
Associated Press
Monday, March 27, 2000
TOKYO -- Just a few years ago, Softbank Corp. was still something of a maverick, shaking up Japan's corporate establishment with its aggressive strategy of investing in Yahoo Inc., ETrade and other Internet companies.
Today, Softbank rules over an empire spanning more than 300 companies worldwide and appears positioned to dominate Japan's booming Internet business.
The Japanese have coined a phrase for the phenomenon -- "Internet zaibatsu" -- comparing Softbank with family-business conglomerates such as Mitsubishi.
Softbank stock has soared, peaking last month at 198,000 yen a share, or about $1,855 at current exchange rates, on the Tokyo Stock Exchange, up nearly 30-fold from 6,700 yen in January 1999.
The shares have since plunged. Some analysts had long said their value was inflated -- a common criticism of high-tech issues.
In trading Friday Softbank stock sold heavily and droped almost 14 percent after a Japanese financial daily newspaper reported that Softbank will increase its capital by selling about 300 billion yen new shares at market price.
There's no doubt Softbank's game is risky.
Internet business is growing at an explosive rate, with users now totaling 17 million in Japan, compared to 94 million in North America. But it remains a volatile market. The search for qualified workers has been a problem.
Softbank also faces increasing competition. There is a flood of rival venture capital seeking to invest in the Internet, making future acquisitions more expensive, says Luigi Limentani, an analyst with Nikko Salomon Smith Barney in Tokyo.
"Softbank's game of investing in the Internet is becoming very difficult," he said.
Last month, Softbank added the banking business to its portfolio in an attempt to further solidify its strategy in electronic commerce.
The Japanese government picked a consortium led by Softbank for exclusive negotiating rights for debt-laden Nippon Credit Bank, which had been placed under government control.
The bank deal could turn out to be Softbank's biggest gamble yet, analysts say.
Some say it will provide Softbank with a much-needed banking unit to facilitate payments for e-commerce. Others warn that Nippon Credit Bank is saddled with the old-style management that brought it down.
Still, Softbank is serving as an inspiration for scores of other ambitious startups in a nation where, until only recently, such entrepreneurship was rare.
Founded in 1981, Softbank initially invested in publishing, although it is now concentrating its investments in Internet ventures. Among its Internet investments are Buy.Com, ETrade Group, E-Loan and ZDNet. It has a 24 percent stake in Yahoo in the United States and owns about 50 percent of Yahoo Japan.
Softbank is also the main force behind Nasdaq Japan, a computerized stock market set to open in June, which will list emerging companies much like the Nasdaq stock market in the United States -- making it easier for ventures to raise cash.
"Softbank is nurturing new businesses in a high-growth business," said Juliette Chow, an analyst with Lehman Brothers Asia in Hong Kong. "It actually promotes entrepreneurship, which is something that Japan lacked before." Much of the credit for Softbank's success goes to the foresight of its president, Masayoshi Son. |
